UBS Lifts VALEO to 'Buy'

Analyst Martin Wilkie Raises Target Price to CHF33

Zurich - UBS analyst Martin Wilkie lifted the recommendation for VALEO to "buy" from "neutral" on Monday and lifted the price target to CHF33 from CHF25.50.

The analyst praises the French automotive supplier's positive full-year outlook, which implies an organic sales growth of more than 15 percent at constant exchange rates and an adjusted operating margin of more than 8.5 percent.

Valuation Appealing

Wilkie sees the current valuation as particularly attractive, as the share is trading at a discount to the sector and peers. He also believes that the positive momentum from the recent reorganization, the focus on electrification and software competence, as well as the acquisition of Valeo Siemens eAutomotive will provide further support.

Key Catalysts

The analyst identifies several catalysts that could drive the share price higher, including:

Continued strong growth in the automotive sector

Successful implementation of the reorganization and restructuring measures

Expansion in the areas of electrification and software

Acquisitions or partnerships in growth areas

Target Price CHF33

Wilkie's target price of CHF33 is based on a 2024 EV/EBIT multiple of 10x, which is in line with the peer group average and reflects the company's strong growth prospects and improving profitability.

Risks

The analyst also notes some downside risks to his recommendation, including:

A downturn in the automotive sector

Implementation risks associated with the reorganization

Competition in the areas of electrification and software

Integration risks associated with acquisitions

Overall, Wilkie believes that the potential rewards outweigh the risks and maintains a positive outlook on VALEO's shares.

Source: UBS